Differences between Customer Centric and Product Centric Companies

“Customers don’t know what they want until you show it to them” ~ Steve Jobs

“We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better” ~ Jeff Bezos

I started today by encountering these two contrasting quotes from probably the best business minds of this century. Both these icons built legendary companies that will be part of every B-School classroom discussions for decades to come. However, if you take a close look at those statements you realise that both these leaders have adopted alternate paths to success, while one believed in developing the best machines the other believed in satisfying the customers’ needs to the best of his abilities. This takes me back in time when I was contemplating the kind of company I would like to be a part of. There were long discussions whether to be a customer-centric startup or product-centric startup, the merits and demerits of each one, how would this decision impact change the way the DNA of the organisation is fabricated. In fact, I even thought: can a company be both product and customer centric at the same time, or is it one way or the other only? Here are my thoughts:

What’s the difference between customer-centric and product-centric companies?

A product-centric company focuses on developing newer and more advanced products irrespective of the demand that is existent in the market. The demand is non-existent, the utility and the quality of the introduced product creates a new customer segment for the product. The best example of such a product is perhaps iPad, and in my regard Apple, Google, and Tesla are great product-centric companies.

A customer-centric company, on the other hand, focuses on identifying a key customer segment, their needs, and wishes, and then continuously developing products and services to fulfill those needs. Such an organisation would typically expand by increasing the wallet share within its customer segment and by entering into newer markets to target similar customers there. One of the best customer-centric companies is Amazon. They identified a customer segment of 20 somethings who are continuously connected to the internet. Then Amazon started off by selling them books online and went on to develop products like Kindle, Fire etc. along with bringing more products these customers could buy from Amazon. Similarly, Nike, Zappos, TD Bank, Southwest Airlines are few more examples of great customer-centric companies.

People, Process & Structure in Product and Customer Focused Companies

Process flow

Process flow in product-centric & customer-centric organisations

In product-centric companies, the product drives everything. There is a natural inclination towards developing and pushing a great product that delivers an amazing customer experience. While in a customer-centric company, sales, and marketing team play an important role in assessing the customer requirements and conveying it to the product division. There is a natural flow of customer requirements being driven all the way up to the product division which then develops what would instantly delight the customer because it solves an existing pain area.

Organisation structure

Interestingly, the organisation structure is also quite different in both these types of companies. The divisions in product-centric organisations are mostly according to the various products that are being developed, whereas a customer-centric organisation is usually flat and very loosely designed to enable proper, flexible & quick communication within various divisions, quicker responses to customers etc. For example, looking at the organisation structure of Apple below, you’d observe that it is divided based on the products like iPad, iPhone, and Mac. The people in this organisation are rewarded for the number of new products that are developed or a number of new patents that have been achieved.

Image courtesy: Fortune

On the other hand, here’s the structure of Southwest Airlines. You would observe they created special focus on customer care by allocating a separate branch for it in the form of People & Admin. The employees in this structure are given freedom and are expected to be more autonomous and responsible. The rewards cycle in customer-centric companies should be very small and people are generally rewarded for their customer service, for example: Gary Kelly, gives a shout-out on their radios for the employees who have done great work during the week.

While each of the focus has its merits, it also has its demerits too. One of the major criticisms of a product focussed approach is that it blinds the company to what are the new developments, opportunities & requirements from the customers’ perspective. As a result, the company might lose relevance with its customers, which in turn might lead to loss of market share and sometimes even extinction of the company. The examples are aplenty. One of the famous ones is Xerox Corporation. Xerox pioneered the dry printing and copying technology, especially in the offices market. However, it turned a blind eye towards the growing need for printers in the home market. Canon took away that entire pie that could have easily been Xerox’s if it wouldn’t have been so product focussed that it lost sight of its customers’ needs. The cases of Nokia & Kodak are other such examples.

The customer-centric approach has its share of disadvantages too. One of the major ones’ is that the customer is only going to stay with you as long as you keep your commitments to your customers, and do it better than your competitors. I believe that customer centricity should be in the DNA of the organisation and should be spearheaded by the CEO to be sustainable. If the company has to continue to provide such a service then the costs increase exponentially but by doing it right and making it the company culture, the customer loyalty will always make it worth every penny!

Now that we know that both product centricity and customer centricity have their own pros and cons, the question is whether a company should either be just product centric or just customer-centric? I don’t believe so! Businesses have to strike a balance between both the approaches. Take Apple for instance. Along with building great products that deliver unparalleled customer experience, Apple also trains its employees with the ethos – “Your job is to understand all of your customers’ needs — some of which they may not even realise they have.”

Customer Experience is the only true differentiator for brands today. It is a very broad…

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